REDMOND, Wash. — Apr. 28, 2011 — Microsoft Corp. today announced third-quarter revenue of $16.43 billion for the quarter ended Mar. 31, 2011, a 13% increase from the same period of the prior year. Operating income, net income, and diluted earnings per share for the quarter were $5.71 billion, $5.23 billion, and $0.61 per share, which represented increases of 10%, 31%, and 36%, respectively, when compared with the prior year period. Diluted earnings per share included a $0.05 tax benefit primarily related to an agreement with the U.S. Internal Revenue Service to settle a portion of their audit of tax years 2004 to 2006.
Source
Microsoft.com - press release
Thursday, April 28, 2011
Johnson & Johnson: $JNJ Announces Dividend Increase of 5.6%
At the new rate, the indicated dividend on an annual basis is
Source
JNJ.com - press release
Wednesday, April 27, 2011
Johnson & Johnson: $JNJ Announces $21.3 Billion Deal With Synthes
Johnson & Johnson said Wednesday that it had agreed to buy Synthes, the medical equipment maker, for $21.3 billion in cash and shares, one of the biggest deals ever in the healthcare sector.
Source
Dealbook
JNJ.com - press release
Source
Dealbook
JNJ.com - press release
Tuesday, April 26, 2011
Pfizer Inc: $PFE cash flow valuation
Current Price: ~ $20/share
Projected Yield: ~ 4.02%
Pfizer is the world's largest pharmaceutical firm, with annual sales near $70 billion. Following the acquisition of Wyeth, prescription drugs now account for close to 90% of sales. Top sellers include cholesterol-lowering Lipitor, Celebrex for arthritis, Viagra for impotence, and Lyrica for epilepsy and some types of neuropathic pain. Recently approved drugs with blockbuster potential include oncology drug Sutent and Chantix for smoking cessation.
I estimated the firm's WACC today at 8.85% using the Capital Asset Pricing Model and the company's recent SEC filings.
Sources
Projected Yield: ~ 4.02%
Pfizer is the world's largest pharmaceutical firm, with annual sales near $70 billion. Following the acquisition of Wyeth, prescription drugs now account for close to 90% of sales. Top sellers include cholesterol-lowering Lipitor, Celebrex for arthritis, Viagra for impotence, and Lyrica for epilepsy and some types of neuropathic pain. Recently approved drugs with blockbuster potential include oncology drug Sutent and Chantix for smoking cessation.
I estimated the firm's WACC today at 8.85% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
| Year | FCF $Millions |
| 2001 | 7060 |
| 2002 | 8425 |
| 2003 | 9098 |
| 2004 | 13739 |
| 2005 | 12627 |
| 2006 | 15544 |
| 2007 | 11473 |
| 2008 | 16537 |
| 2009 | 15382 |
| 2010 | 9941 |
Average Annual Growth FCF: approx. 8%
CAGR FCF: approx. 4%
Consensus Forecast Industry 5-Year Growth: approx. 12% per yearConsensus Forecast Company 5-Year Growth: approx. 3% per year
Scenario 1
Average FCF 2009-2010 is ~ $12,500 million. Starting at $12,500 million FCF, assuming the company achieves a 5-year growth rate in FCF of 3% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:
Discounted Cash Flow Valuation
| Year | FCF $Millions |
| 0 | 12500 |
| 1 | 12875 |
| 2 | 13261 |
| 3 | 13659 |
| 4 | 14069 |
| 5 | 14491 |
| Terminal Value | 168680 |
The firm's future cash flows, discounted at a WACC of 8.85%, give a present value for the entire firm (Debt + Equity) of $163,514 million. If the firm's fair value of debt is estimated at $48,000 million, then the fair value of the firm's equity could be $115,514 million. $115,514 million / 8000 million outstanding shares is approximately $15 per share and a 20% margin of safety is $12/share.
Scenario 2
Starting at $12,500 million FCF, assuming the company achieves a 5-year growth rate in FCF of 3% per year, and then 3% growth per year forever:
Discounted Cash Flow Valuation
| Year | FCF $Millions |
| 0 | 12500 |
| 1 | 12875 |
| 2 | 13261 |
| 3 | 13659 |
| 4 | 14069 |
| 5 | 14491 |
| Terminal Value | 255205 |
The firm's future cash flows, discounted at a WACC of 8.85%, give a present value for the entire firm (Debt + Equity) of $220,142 million. If the firm's fair value of debt is estimated at $48,000 million, then the fair value of the firm's equity could be $172,142 million. $172,142 million / 8000 million outstanding shares is approximately $22 per share and a 20% margin of safety is $18/share.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
$IBM Board Approves 15 Percent Increase in Quarterly Cash Dividend; Authorizes $8.0 Billion for Stock Repurchase
ST. LOUIS, Mo. - 26 Apr 2011: The IBM (NYSE: IBM) board of directors today declared a regular quarterly cash dividend of $0.75 per common share, payable June 10, 2011 to stockholders of record May 10, 2011.
Today’s dividend declaration represents an increase of $0.10, or 15 percent higher than the prior quarterly dividend of $0.65 per common share.
The board today also authorized $8 billion in additional funds for use in the company’s stock repurchase program. IBM will repurchase shares on the open market or in private transactions from time to time, depending on market conditions.
Source
IBM.com - press release
Today’s dividend declaration represents an increase of $0.10, or 15 percent higher than the prior quarterly dividend of $0.65 per common share.
The board today also authorized $8 billion in additional funds for use in the company’s stock repurchase program. IBM will repurchase shares on the open market or in private transactions from time to time, depending on market conditions.
Source
IBM.com - press release
Friday, April 15, 2011
Johnson & Johnson: $JNJ Holds Deal Talks With Synthes
Johnson & Johnson is in talks to buy a Swiss-American medical equipment maker (Dealbook)
Johnson & Johnson: $JNJ Provides Additional Information Regarding Amended Agreement With Merck
Under the terms of the amended distribution agreement, Merck's subsidiary, Schering-Plough (Ireland) will relinquish exclusive marketing rights for REMICADE and SIMPONI to Johnson & Johnson’s Janssen pharmaceutical companies in territories including Canada, Central and South America, the Middle East, Africa and Asia Pacific* (“relinquished territories”), effective July 1, 2011. Merck will retain exclusive marketing rights throughout Europe, Russia and Turkey (“retained territories”). The retained territories represent approximately 70 percent of Merck's 2010 revenue of approximately $2.8 billion from REMICADE and SIMPONI, while the relinquished territories represent approximately 30 percent. In addition, all profit derived from Merck's exclusive distribution of the two products in the retained territories will be equally divided between Merck and Johnson & Johnson, beginning July 1, 2011. Under the prior terms of the distribution agreement, the contribution income (profit) split, which is currently at 58 percent to Merck and 42 percent to Centocor Ortho Biotech Inc., would have declined for Merck and increased for Johnson & Johnson each year until 2014, when it would have been equally divided. Johnson & Johnson will also receive a one-time payment of $500 million in April 2011. Merck expects to file the amended agreement on a Form 8-K with the Securities and Exchange Commission shortly.
The company is providing the following additional details relevant to the amended agreement:
- In 2010,
Johnson & Johnson reported annual sales for REMICADE of$4.6 billion and annual sales for SIMPONI of$226 million , which included sales of these products to its distribution partner Merck of approximately$1.2 billion . In the territories being relinquished toJohnson & Johnson as a result of the amended agreement, 2010 annual end-user sales for REMICADE and SIMPONI were approximately$900 million . The amended agreement impact on 2010 sales on a pro forma basis would have resulted in nearly$500 million in incremental net sales being recorded byJohnson & Johnson on an annual basis for these products, which excludes sales that were previously recorded. Johnson & Johnson will begin recording 2011 sales of product from the relinquished territories onJuly 1, 2011 .
- The division of contribution income on sales will be amended to a 50 percent/50 percent split between
Johnson & Johnson and Merck, fromJuly 1, 2011 , throughOct. 1, 2024 . This compares to the prior split of 42 percent/58 percent in 2011 forJohnson & Johnson and Merck respectively, which would have increased to a 50 percent/50 percent split in 2014.
Johnson & Johnson will receive a one-time,$500 million payment from Merck during the second quarter of 2011.
- The 2011 earnings impact is not expected to be significant.
- The company will discuss the amended agreement during its scheduled quarterly earnings call on
April 19, 2011.
Thursday, April 14, 2011
Johnson & Johnson: $JNJ announces voluntary recall
Titusville, N.J., April 14, 2011 - Ortho-McNeil Neurologics Division of Ortho-McNeil-Janssen Pharmaceuticals, Inc., today announced it is voluntarily recalling two lots of TOPAMAX® (topiramate) 100mg Tablets. These two lots were shipped between 10/19/2010 and 12/28/2010 and distributed in the U.S. and Puerto Rico. While the recall encompasses approximately 57,000 bottles of TOPAMAX®, the company believes there are fewer than 6,000 bottles remaining in the marketplace. The recall stems from four consumer reports of an uncharacteristic odor thought to be caused by trace amounts of TBA (2,4,6 tribromoanisole).
About Ortho-McNeil Neurologics Division of Ortho-McNeil-Janssen Pharmaceuticals, Inc.
Headquartered in Titusville, N.J., Ortho-McNeil Neurologics Division of Ortho-McNeil-Janssen Pharmaceuticals, Inc. is a Johnson & Johnson company that focuses exclusively on providing solutions that improve neurological health. The Company currently has products for Alzheimer's disease, epilepsy, and acute and preventive migraine treatment. In conjunction with internal and external research partners, the Company continues to explore new opportunities to develop solutions for unmet healthcare needs in neurology.
Source
JNJ.com - press release
Wednesday, April 13, 2011
Wal-Mart Stores Inc: $WMT to borrow $5 Billion
$5,000,000,000
Wal-Mart Stores, Inc.
$1,000,000,000 1.625% NOTES DUE 2014
$1,000,000,000 2.800% NOTES DUE 2016
$1,000,000,000 4.250% NOTES DUE 2021
$2,000,000,000 5.625% NOTES DUE 2041
We are offering $1,000,000,000 of our 1.625% notes due 2014, $1,000,000,000 of our 2.800% notes due 2016, $1,000,000,000 of our 4.250% notes due 2021 and $2,000,000,000 of our 5.625% notes due 2041.
We will pay interest on the notes of each series on April 15 and October 15 of each year, beginning on October 15, 2011. Interest on the notes of each series will accrue from April 18, 2011 at the annual interest rate shown above for that series. The 2014 notes will mature on April 15, 2014; the 2016 notes will mature on April 15, 2016; the 2021 notes will mature on April 15, 2021; and the 2041 notes will mature on April 15, 2041.
The notes of each series will be our senior unsecured debt obligations, will rank equally with our other senior unsecured indebtedness and will not be convertible or exchangeable. The notes will not be redeemable prior to maturity.
Neither the Securities and Exchange Commission nor any regulatory body has approved or disapproved of these securities or passed on the accuracy or adequacy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.
| Per 2014 Note | Per 2016 Note | Per 2021 Note | Per 2041 Note | Total | ||||||||||||||||
Public offering price | 99.730 | % | 99.631 | % | 99.349 | % | 98.084 | % | $ | 4,948,780,000 | ||||||||||
Underwriting discount | 0.250 | % | 0.350 | % | 0.450 | % | 0.875 | % | $ | 28,000,000 | ||||||||||
Proceeds, before expenses, to Wal-Mart Stores, Inc. | 99.480 | % | 99.281 | % | 98.899 | % | 97.209 | % | $ | 4,920,780,000 | ||||||||||
The notes will not be listed for trading on any securities exchange. Currently, there is no public market for the notes of any series.
The underwriters expect to deliver the notes in book-entry form only through the facilities of The Depository Trust Company and its participants, including Clearstream Banking, société anonyme, and Euroclear Bank S.A./N.V., against payment on or about April 18, 2011.
USE OF PROCEEDS
Except as otherwise specifically described in the applicable prospectus supplement, we will use the net proceeds from the sale of the debt securities:
| • | to repay commercial paper indebtedness and other short-term borrowings we have incurred for general corporate purposes, including to finance capital expenditures, such as the purchase of land and construction of stores and other facilities, and to finance the acquisition of inventory; |
| • | to repay long-term debt as it matures or to refinance debt of one or more of our subsidiaries; |
| • | to repay short-term borrowings that we have incurred to acquire other companies and assets; |
| • | to repay short-term borrowings that we have incurred to acquire our common stock pursuant to our share repurchase program; |
| • | to finance acquisitions; |
| • | to meet other working capital requirements; and |
| • | for other general corporate purposes. |
Before we apply the net proceeds of any sale of our debt securities to one or more of these uses, we may invest those net proceeds in short-term marketable securities.
Source
Monday, April 11, 2011
Procter & Gamble: $PG declares 9% quarterly dividend increase
CINCINNATI, April 11, 2011 – The Board of Directors of The Procter & Gamble Company (NYSE:PG) declared an increase in the quarterly dividend from forty-eight point eighteen cents ($0.4818) to fifty two point five cents ($0.525) per share on the Common Stock and on the Series A and Series B ESOP Convertible Class A Preferred Stock of the Company, payable on or after May 16, 2011 to Common Stock shareholders of record at the close of business on April 29, 2011 and payable on the dividend payment date for the Common Stock to Series A and Series B Preferred Stock shareholders of record at the start of business on that date. This represents a 9% increase compared to the prior quarterly dividend.
P&G has been paying a dividend for 121 consecutive years since its incorporation in 1890 and has increased its dividend for 55 consecutive years at an annual compound average rate of approximately 9.5%.
Source
Friday, April 8, 2011
Johnson & Johnson: $JNJ Announces Settlement with U.S. Department of Justice and U.S. Securities and Exchange Commission
New Brunswick, NJ (April 8, 2011) - Johnson & Johnson (NYSE: JNJ) announced today it will pay $70,006,316 in fines, disgorgement and interest, an amount previously reserved for, in a settlement related to publicly disclosed Foreign Corrupt Practices Act (FCPA) investigations by the U.S. Department of Justice (DOJ) and the U.S. Securities and Exchange Commission (SEC). The Company hopes to reach a settlement of a related investigation by the U.K. Serious Fraud Office (SFO) in several days.
Source
JNJ.com - press release
Source
JNJ.com - press release
Thursday, April 7, 2011
Becton Dickinson & Co: $BDX cash flow valuation
Current Price: ~ $81/share
Projected Yield: ~ 2.11%
Becton, Dickinson is the world's largest manufacturer and distributor of medical surgical products, such as needles, syringes, and sharps-disposal units. The company also manufactures diagnostic instruments and reagents, as well as flow cytometry and cell imaging systems. International revenue accounts for 55% of the company's business.
I estimated the firm's WACC today at 8.66% using the Capital Asset Pricing Model and the company's recent SEC filings.
Projected Yield: ~ 2.11%
Becton, Dickinson is the world's largest manufacturer and distributor of medical surgical products, such as needles, syringes, and sharps-disposal units. The company also manufactures diagnostic instruments and reagents, as well as flow cytometry and cell imaging systems. International revenue accounts for 55% of the company's business.
I estimated the firm's WACC today at 8.66% using the Capital Asset Pricing Model and the company's recent SEC filings.
Recent free cash flows and noted growth rates:
Year | FCF $Millions |
2001 | 408 |
2002 | 576 |
2003 | 645 |
2004 | 832 |
2005 | 909 |
2006 | 594 |
2007 | 662 |
2008 | 1036 |
2009 | 1126 |
2010 | 1207 |
TTM | 1310 |
Average Annual Growth FCF: approx. 16%
CAGR FCF: approx. 13%
Consensus Forecast Industry 5-Year Growth: approx. 17% per yearConsensus Forecast Company 5-Year Growth: approx. 10% per year
Assuming the company achieves a 5-year growth rate in FCF of 10% per year, and assuming that after the next five years, the company achieves no growth in FCF or 0% growth per year forever:
Discounted Cash Flow Valuation
Year | FCF $Millions |
0 | 1310 |
1 | 1441 |
2 | 1585 |
3 | 1744 |
4 | 1918 |
5 | 2110 |
Terminal Value | 26805 |
The firm's future cash flows, discounted at a WACC of 8.66%, give a present value for the entire firm (Debt + Equity) of $24,494 million. If the firm's fair value of debt is estimated at $2842 million, then the fair value of the firm's equity could be $21,652 million. $21,652 million / 221 million outstanding shares is approximately $98 per share and a 20% margin of safety is $78/share.
Sources
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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